Mueller Water Products(MWA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents Mueller Water Products, Inc.'s unaudited condensed consolidated financial statements for the periods ended March 31, 2025, detailing financial position and performance - The company operates in two business segments: Water Flow Solutions (iron gate valves, specialty valves, service brass) and Water Management Solutions (fire hydrants, repair/installation, metering, leak detection, etc.)[25] - The business is seasonal, with net sales and operating income historically lowest in the quarters ending December 31 and March 31 due to weather conditions restricting construction activity[27] Unaudited Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2025, shows increased total assets and stockholders' equity, alongside a decrease in total liabilities Condensed Consolidated Balance Sheet Data (in millions) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total current assets | $890.7 | $858.4 | | Total assets | $1,670.6 | $1,635.9 | | Total current liabilities | $235.3 | $258.0 | | Total liabilities | $797.0 | $825.8 | | Total stockholders' equity | $873.6 | $810.1 | Unaudited Condensed Consolidated Statements of Operations Net sales and net income increased for both the three and six-month periods ended March 31, 2025, reflecting improved operational performance Key Operating Results (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $364.3 | $353.4 | $668.6 | $609.8 | | Gross profit | $128.0 | $130.4 | $231.0 | $216.7 | | Operating income | $69.9 | $63.5 | $117.3 | $86.3 | | Net income | $51.3 | $44.3 | $86.6 | $58.6 | | Diluted EPS | $0.33 | $0.28 | $0.55 | $0.37 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities increased for the six months ended March 31, 2025, contributing to a higher cash balance at period-end Cash Flow Summary - Six Months Ended March 31 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $68.4 | $62.2 | | Net cash used in investing activities | $(21.0) | $(15.7) | | Net cash used in financing activities | $(26.9) | $(31.4) | | Net change in cash and cash equivalents | $19.3 | $18.9 | | Cash and cash equivalents at end of period | $329.2 | $179.2 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes provide detailed disclosures on segment performance, debt, legal contingencies, and subsequent events supporting the financial statements Segment Performance - Six Months Ended March 31, 2025 (in millions) | Segment | Net Revenue | Operating Income | | :--- | :--- | :--- | | Water Flow Solutions | $390.8 | $89.4 | | Water Management Solutions | $277.8 | $58.6 | | Corporate | - | $(30.7) | | Total | $668.6 | $117.3 | - The company has $450.0 million of 4.0% Senior Unsecured Notes outstanding, which mature on June 15, 2029[61] - Contingencies include a matter with U.S. Customs and Border Protection (CBP) for underpayment of duties, for which $9.1 million was expensed in 2024, and a class-action lawsuit related to a 2023 cybersecurity incident[91][93] - On April 30, 2025, the Board of Directors declared a quarterly dividend of $0.067 per share[99] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting sales growth, gross margin trends, liquidity, and future outlook for fiscal year 2025 - For fiscal year 2025, the company anticipates consolidated net sales will increase between 5.7% and 6.5% compared with fiscal 2024[109] - The company expects continued resilient demand in the municipal repair and replacement market, but anticipates new residential construction will be constrained by the interest rate environment[109] - Liquidity is strong with $329.2 million in cash and cash equivalents and an additional $163.0 million of borrowing capacity under the ABL facility as of March 31, 2025[140] - Fiscal 2025 capital expenditures are expected to be between $45.0 million and $50.0 million[144] Results of Operations Net sales and operating income increased for the six months ended March 31, 2025, despite a slight decline in gross margin due to inefficiencies YTD 2025 vs. YTD 2024 Performance (in millions) | Metric | YTD 2025 | YTD 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $668.6 | $609.8 | +9.6% | | Gross Profit | $231.0 | $216.7 | +6.6% | | Operating Income | $117.3 | $86.3 | +35.9% | | SG&A | $109.6 | $120.6 | -9.1% | - Water Flow Solutions YTD net sales increased 12.6% to $390.8 million, driven by higher volumes and pricing[133] - Water Management Solutions YTD net sales increased 5.7% to $277.8 million, also due to higher volumes and pricing[136] Liquidity and Capital Resources The company maintains strong liquidity with substantial cash and available credit, supported by positive operating cash flows and a share repurchase program - The company repurchased $5.0 million of its common stock in the first six months of fiscal 2025, with $75.0 million remaining under the share repurchase authorization[141] - Net cash provided by operating activities increased to $68.4 million for the six months ended March 31, 2025, from $62.2 million in the prior year, primarily due to higher net income[143] - Material cash requirements include annual interest payments of $18.0 million on senior notes, lease obligations, and purchase obligations of approximately $110.9 million expected in the next 12 months[158] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[165] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[163] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 10 of the financial statements for details on various legal proceedings, including environmental, customs, and cybersecurity-related matters - The company is involved in various legal proceedings, with details provided in Note 10 of the financial statements[169] Risk Factors This section indicates no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - The report refers to the risk factors discussed in the company's 2024 Annual Report on Form 10-K and indicates no material changes from that disclosure[170] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 fiscal 2025, the company repurchased shares under its stock repurchase program, with a significant amount remaining authorized for future repurchases Share Repurchases in Q2 Fiscal 2025 | Period | Total Shares Purchased | Avg. Price Paid per Share | Shares Purchased as Part of Program | Remaining Authorization (millions) | | :--- | :--- | :--- | :--- | :--- | | Jan 2025 | — | — | — | $80.0 | | Feb 2025 | 199,389 | $26.75 | 185,961 | $75.0 | | Mar 2025 | — | — | — | $75.0 | - During the three months ended March 31, 2025, the company repurchased 185,961 shares under its share repurchase authorization. An additional 13,428 shares were surrendered to pay tax withholding obligations for equity awards[174] Other Information This section discloses a Rule 10b5-1 trading plan adopted by a Board member, with no other Section 16 officers or directors adopting or modifying plans - On February 7, 2025, a Board Member, Brian Healy, adopted a Rule 10b5-1 trading plan to purchase up to $110,000 worth of company stock, with a maximum duration until January 30, 2026[172] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL-formatted financial data - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[176]